February 16th, 2023 8:57 AM by Richard Sardella MLO.100007700/NMLS 233568
This morning at 8:30 am ET Jan producer price index (PPI), inflation increasing at the wholesale level. PPI m/m expected +0.4% after declining 0.5% in Dec increased 0.7%, year/year expected +5.5% increased 6.0%. The core PPI excluding food and energy was thought to be +0.3% m/m increased 0.5%, year/year estimates were forecasts +5.0% increased 5.4%.
Weekly jobless claims expected at 200K were up 194K, -1K from the prior week.
January housing starts forecast 1.365 mil, as reported 1.309 mil; starts in Dec revised from 1.382 mil to 1.371 mil. Building permits at 1.339 mil against estimates of 1.350 mil. Residential starts decreased 4.5% last month to a 1.31 million annualized rate, marking the longest stretch of declines since 2009. Single-family homebuilding fell to an annualized 841,000 rate.
Feb Philadelphia Fed business index continue to decline, expected -7.2 the index dropped to -24.3.
Four data points at 8:30 am pushed the 10 year note to 3.84%, +3 bp on the initial reaction and MBS prices down 16 bps from yesterday’s close.
The main data this morning, the PPI, not much reaction to it until 9:15 am, the 10 year note increased to 3.84% from 3.81%. MBS prices didn’t react until 9 am when selling pushed MBS prices down 22 bps.
At 9:30 am the DJIA opened -283, NASDAQ -172, S&P -47. 10 year 3.85% +4 bps. FNMA 5.5 30 year coupon at 9:30 am -16 bps from yesterday’s close and -11 bps from 9:30 am yesterday.
Federal Reserve Bank of Cleveland President Loretta Mester said she saw a compelling case for rolling out another 50 basis point hike at the March FOMC meeting. “At this juncture, the incoming data have not changed my view that we will need to bring the fed funds rate above 5% and hold it there for some time,”… “Indeed, at our meeting two weeks ago, setting aside what financial market participants expected us to do, I saw a compelling economic case for a 50 basis-point increase, which would have brought the top of the target range to 5%.” “Over-tightening also has costs, but if inflation begins to move down faster than anticipated, we can react appropriately,” Mester said. “Given the risks and costs, we need to be prepared to move the federal funds rate higher if the upside risks to inflation are realized and inflation fails to moderate as expected or if the imbalances between demand and supply in product and labor markets persist longer than anticipated.”
The 10 is approaching its next technical support at 3.90%, the RSI also approaching oversold levels, although it remains negative. The Fed must be careful now, as Ms. Mester commented (above), inflation is slowing but still stubbornly high after the rate increases over the last six months.
PRICES @ 10:00 AM
10 yr note: 3.86% +5 bp
5 yr note: 4.08% +3 bp
2 Yr note: 4.67% +5 bp
30 yr bond: 3.91% +6 bp
Libor Rates: 1mo 4.601%; 3 mo 4.876%; 6 mo 5.180%; 1 yr 5.584% (2/ 15/23)
30 yr FNMA 6.0: @9:30 am 101.34 -23 bp (-24 bp from 9:30 am yesterday)
30 yr FNMA 5.5: @9:30 am 100.02 -17 bp (-11 bp from 9:30 am yesterday)
30 yr GNMA 5.5: @9:30 am 100.67 -11 bp (+11 bp from 9:30 am yesterday)
Dollar/Yuan: $6.8641 +$0.0111
Dollar/Yen: 134.41 +0.24 yen
Dollar/Euro: $1.0663 -$0.0023
Dollar Index: 104.08 +0.16
Gold: $1840.70 -$4.60
Bitcoin: 24,445 +272
Crude Oil: $79.00 +$0.41
DJIA: 33,738 -389
NASDAQ: 11,913 -157
S&P 500: 4096 -52
Richard Sardella has been actively managing and providing services in the mortgage industry for over 30 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.
All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.
MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.